"This is quite worrying. It does suggest that as we come to the turn of the year the economy's been losing momentum, so it doesn't augur well for growth.

"I think (the data) will make it clear to the Bank of England that they should consider more easing, but the point is in the short term at least it's coming in the form of the Funding for Lending scheme and the data on that are quite encouraging."

Markit/Cips said the PMI dropped to 48.9 in December - its lowest level since April - from 50.2 in November.

It is the first time the index has fallen below the 50 mark that separates growth from contraction since December 2010, when unusually heavy snow disrupted many businesses.

Separate BoE figures released on Friday morning showed the biggest monthly rise in mortgage approvals since January 2012.

The bank said mortgage approvals reached 54,036 in November, up from 53,071 in October.

Before the financial crisis in 2008 monthly mortgage approvals ran at around 90,000 and were a major driver of consumer spending.